Leverage in Pharma

Sammanfattning: Purpose: To test established theories on capital structure determinants for the pharmaceutical industry and to discern the determinants of capital structure of this industry. Methodology: A quantitative study is conducted using a deductive approach to statistically describe the nature of the global pharmaceutical industry's capital structure. Theoretical perspective: The theoretical framework of this study consists of the trade-off theory and the pecking order theory. The study presents previous research on capital structure determinants for the pharmaceutical industry and companies in general. The theoretical foundation of the dependent and explanatory variables used in the study is also presented. Empirical foundation: The sample consists of 209 global pharmaceutical companies from high- income OECD countries. The data was collected from Datastream and covers the time period of 2011 to 2016. Conclusions: The statistically significant determinants of the capital structure for global pharmaceutical companies are dividends, profitability, size and corporate social responsibility. Dividends and profitability are negatively correlated with debt while size and corporate social responsibility are positively correlated. The trade-off theory is a better predictor for global pharmaceutical companies' capital structure determinants, with three significant results compared to the pecking order's one correct prediction.